Bressler Risk Blog

New York State Bar: “Ethics Opinion 1309: Termination of representation by governmentally funded legal services organization” —

• “If a governmentally funded civil legal services organization loses some or all of its funding, necessitating a reduction in staff, thus increasing the workload of the remaining attorneys, and the remaining attorneys are unable to provide competent representation to existing clients, the organization or its lawyers must seek permission from the tribunal to withdraw as counsel for individual clients, subject to certain conditions.”

“NRA sues Dallas lawyer for nearly destroying the organization he represented” —

• “The National Rifle Association is demanding that Dallas lawyer William Brewer and his firm, Brewer Attorneys & Counselors, pay back the $200 million in legal fees plus additional damages, alleging the firm committed egregious legal malpractice that caused the gun rights group ‘catastrophic financial and reputational harm.'”
• “In court documents filed in October, the NRA claims Brewer and his team breached their professional and fiduciary duties in representing the Virginia-based gun advocacy organization over a six-year span in many high-profile legal actions, including against the NRA’s longtime public relations firm and its then-president Lt. Col. Oliver North.”
• “‘The NRA alleges that, through negligent, conflicted, and self-interested professional representation, the Brewer Firm and Brewer systematically subordinated their client’s interests to their own – and, in doing so, inflicted catastrophic financial and reputational harm on the organization they were retained to protect,’ the NRA claims in court documents.”
• “The NRA states that it retained the Brewer firm in March 2018 in a sole ‘narrow engagement to shepherd the NRA through a single insurance-regulatory inquiry.'”
• “Brewer’s work for the NRA ‘quickly metastasized over more than six years into a sprawling, nationwide representation that came within a breath of destroying the organization it was retained to defend,’ court documents state.”
• “The NRA claims that Brewer ‘pursued a legal strategy that repeatedly exacerbated the NRA’s exposure instead of mitigating it.'”
• “The filing Friday states that Brewer and his firm had ‘actual knowledge of the very executive misconduct that placed the NRA in regulatory peril’ but instead ‘chose to conceal and disregard misconduct rather than cure it’ and thus ‘shielding’ the NRA’s former leader Wayne LaPierre ‘in order to further protect the firm’s and Brewer’s own interests.'”
• “The NRA, in the documents, cites five specific matters in which it argues that the Brewer Firm committed legal malpractice, breach of fiduciary duty, knowing participation in a breach of fiduciary duty and negligent misrepresentation.”
• “The NRA’s filing also claims that the Brewer Firm ‘engineered a secret Chapter 11 bankruptcy that the federal bankruptcy court dismissed as not filed in good faith and condemned as shocking.’ ‘The failed bankruptcy filing cost the NRA tens of millions of dollars in out-of-pocket attorneys’ fees and expenses, including over $5 million paid to the Brewer Firm, and millions of dollars in reputational and economic damages,’ court documents state.”
• “The lawyers in this new litigation are extremely familiar with each other, and they were on opposite sides of some of these same disputes for the past several years.”
• “The NRA hired Greenberg Traurig partners Michael Gruber and Brian Mason. Gruber and Mason represented Ackerman McQueen in the litigation against the NRA when they were lawyers at Dorsey & Whitney.”

“Fully informed, not infinitely informed: Chancery Court clarifies advisor-conflict disclosure under Corwin – Quorum: Boardroom insights into governance, M&A, and securities law” —

• “The Delaware Court of Chancery, in Berger v. Fox, dismissed a putative class action challenging an all-cash take-private merger of a publicly traded wealth management company with affiliates of a private equity firm.”
• “The Court held that the business judgment rule disposed of plaintiffs’ fiduciary duty claims because the merger was approved by a fully informed, uncoerced vote of the disinterested stockholders, applying the Delaware Supreme Court’s landmark decision Corwin v. KKR Financial Holdings LLC.”
• “The Court rejected Plaintiffs’ contention that the vote was not fully informed due to inadequate disclosure of alleged financial advisor and law firm conflicts, noting that all material information concerning these relationships and fees was adequately disclosed in the company’s proxy statement. The decision reaffirms the enduring power of Corwin cleansing in Delaware and provides useful disclosure guidance where board advisors have prior or pending relationships with transactional counterparties.”
• “Plaintiffs filed suit, alleging that the Envestnet board conducted a flawed merger process and withheld material information about the Financial Advisor’s and Law Firm’s conflicts in connection with the stockholder vote. Plaintiffs asserted claims for breach of fiduciary duty against Envestnet’s directors and CEO, and for aiding and abetting against the Financial Advisor.”
• “The Court found no indicia of bad faith in Plaintiffs’ allegations. The Court noted that the independent board ‘inform[ed] itself of potential conflicts, engag[ed] with multiple bidders, and met[] over a dozen times before reaching a deal.'”
• “Delaware courts will closely scrutinize potential advisor conflicts and require full disclosure of investment banker compensation and potential conflicts in the proxy statement provided to stockholders. Berger, however, clarifies that when a financial advisor faces a conflict, it is generally sufficient for the board to disclose ‘the relationship itself and the amount of fees the advisor received.’ The board is not required to disclose ‘the specific fees a financial advisor received from unrelated work for a transactional counterparty,’ so long as the relationship and a ‘rough scale’ of those fees are disclosed.”
• “Berger highlights that boards may properly rely on advisors in strategic processes—even those with relationships with counterparties—without losing all-important Corwin business judgment protection. The key is (i) identifying potential conflicts as soon as possible and (ii) adequately disclosing all material information concerning to stockholders in advance of a Corwin-cleansing vote. In Berger, the Court concluded that the board did both, resulting in dismissal of all claims.”

Always with our thanks for his diligent efforts, here’s the latest of note from Bill Freivogel:

• Engel v. Ulvestad, 2026 WL 3205372 (Minn. App. Oct. 26, 2026).
  • This is a boundary-line dispute involving the use of a private surveyor as an expert witness. One party moved to disqualify the surveyor. The trial court denied the motion, and, in this opinion, the appellate court affirmed.
  • The surveyor’s company had been bought by a parent company. The parent company had earlier rendered an arguably contrary opinion. The appellate court upheld the trial court on two bases: (1) The moving party had not objected when the surveyor testified with no objection in an earlier trial of this matter; and, (2) The moving party was not making a breach-of-confidentiality claim.
• Citizens of Humanity, LLC v. RLI Ins. Co., 2026 WL 3258510 (9th Cir. Oct. 29, 2026).
  • In this one-page opinion the appellate court, interpreting California cases, ruled that because InsCo had issued a “general” (not specific) reservation of rights, the insured could not claim a conflict of interest and right to independent counsel.
• Cymbidium Restoration Trust v. Am. Homeowner Preservation Trust, No. C24-0025-KKE (W.D. Wash. Oct. 26, 2026).
  • Plaintiff, Cymbidium moved to disqualify Law Firm from representing Defendant, AHP, under Rule 1.9(a) (former client rule). In this opinion the court granted the motion.
  • Law Firm never represented Plaintiff, but it earlier represented non-party Oak Harbor in preparing a mortgage sale agreement, which was an earlier version of the agreement involved in this case.
  • Oak Harbor manages Plaintiff’s real estate investments. Because of that relationship, and because Oak Harbor is a party in separate but related litigation, Law Firm is being adverse to Oak Harbor in this case. Thus, Plaintiff has standing to make the motion.
  • Moreover, given that many of the provisions prepared by Law Firm in the earlier version of the agreement remain in the current version, this case is substantially related to the earlier representation.
• Doe v. Lewis Roca Rothgerber Christie LLP, 2026 WL 3181223 (D.N.M. Oct. 22, 2026).
  • In this legal malpractice case the court, in this opinion, denied Law Firm’s motion for summary judgement. Plaintiff had brought proceedings in Rhode Island against her Catholic school and a school employee for child sexual abuse. The claim against the school was barred by the statute of limitations.
  • Law Firm had represented Plaintiff in a suit for injunction against the employee, not the school. Plaintiff’s main claim against Law Firm was the firm did not advise Plaintiff she might have a claim against the school itself within the time allowed by the statute of limitations.
  • Complicating Law Firm’s situation, the school was paying Law Firm’s fees in the injunction case, and Law Firm, over the years, had received millions in fees from Catholic institutions, including for defending sexual abuse cases.
  • Given the material limitation provisions of New Mexico’s versions of MR 1.7(a)(2) and the fee provisions of MR 1.8(f), a jury could find Law Firm’s conduct fell below the standard of care in not timely advising Plaintiff about suing the school.
• Morrison v. MSI Spergel Inc., 2026 ONCA 738 (Ct. App. Ont. Oct. 20, 2026).
  • Bankruptcy Trustee sought a declaration that Bankrupt “made a transfer at undervalue” to his wife. The motion judge found the transfer was partially void. A creditor appealed the order in part because the Trustee’s lawyer (“Lawyer”) had a conflict of interest.
  • Lawyer had earlier represented Bankrupt on matters relating to his financial situation. In this proceeding, among other things, Lawyer on behalf of the Trustee accused Bankrupt of intent to “defraud, defeat or delay a creditor” and moved to compel Bankrupt to make certain financial disclosures. In this decision, based upon Lawyer’s conflict, the appellate court set aside the motion judge’s order, directed a new hearing in Superior Court, and disqualified Lawyer from representing the Trustee. (Elbows up, Canada!)
• De Cotiis v. De Cotiis, 2026 BCSC 2001 (CanLII) (S. Ct. B.C. Oct. 13, 2026).
  • Plaintiff moved to disqualify the law firm (“Law Firm”) for Defendant Hughes because Plaintiff had had contacts with a lawyer in Law Firm (“Lawyer A”) about possibly representing Plaintiff in this matter. In this opinion the court denied the motion to disqualify, because: (1) Plaintiff had not formally retained Law Firm; (2) a different lawyer in Law Firm (“Lawyer B”) was representing Hughes: and (3) Law Firm had erected a screen between Lawyers A and B.
  • After an extensive discussion of all the circumstances of the contacts between Plaintiff and Law Firm, including an analysis of information conveyed by Plaintiff to Law Firm, the court concluded that the chance of prejudice to Plaintiff was minimal to non-existent. The opinion contains a good discussion of the interplay among the Supreme Court’s MacDonald Estate decision, the B.C. Rules, and several B.C. decisions and their application here.

Dear Ethics Lawyer writes: “Conflict with Unnamed Class Members” —

• “Q: Dear Ethics Lawyer, I am defending a putative class action for one of our firm’s largest business clients. Plaintiff’s counsel frequently files class actions and has at least four of them, that I am aware of, against clients of our firm. The class described in the suit I am defending is quite broad, which gave me an idea. After looking into it, I believe that at least two of our clients who are currently being sued by plaintiff’s firms in other matters would be within the class described in the matter I am defending. It seems to me that this places plaintiff’s counsel adverse to their own class members. Doesn’t this create a conflict under Rule 1.7 for which I could seek their disqualification?”
• “A: As I often write in this column, you should check authorities in your applicable jurisdiction, but Model Rule 1.7 appears to address this situation in defining who the lawyer’s client is in the context of class actions. Comment 25 to Rule 1.7 provides:”
  • “When a lawyer represents or seeks to represent a class of plaintiffs or defendants in a class-action lawsuit, unnamed members of the class are ordinarily not considered to be clients of the lawyer for purposes of applying paragraph (a)(1) of this Rule. Thus, the lawyer does not typically need to get the consent of such a person before representing a client suing the person in an unrelated matter. Similarly, a lawyer seeking to represent an opponent in a class action does not typically need the consent of an unnamed member of the class whom the lawyer represents in an unrelated matter.”
• “In your situation, the fact that plaintiff’s counsel in your case is adverse to unnamed class members in other matters does not (at least without more) create a conflict for them.”
• “The situation would be different if a named class representative was adverse to their counsel. It could also be different if there were facts creating a material limitation conflict under Rule 1.7(a)(2) concerning plaintiff’s counsel’s representation of the class while being adverse to one of the unnamed class members in other matter(s), e.g., possibly arising from any centrality of the unnamed class member in proof or defense of the allegations in the suit.”
• “Similarly, although perhaps unlikely, you should also consider whether your defense of the class action creates any issues (material limitation conflict or otherwise) with your representation of other firm clients whom you know to be members of the class.”

“Weil Gotshal’s Closest Relationship Cost the Firm Everything” —

• “At Weil Gotshal & Manges, there was no relationship more important than that between Mike Aiello, its highest paid partner and most prodigious business generator, and Barry Wolf, its longtime executive partner. Their story is the story of Weil’s final decade. Their relationship dictated the firm’s strategy and decisions. It decided who stayed at the firm and who left. And when it shattered, the firm did too.”
• “Interviews with more than a dozen people, most of whom held leadership positions at Weil, point out how the complex relationship between Wolf and Aiello—and key misunderstandings between the pair—set the stage for the firm’s implosion within weeks of Aiello’s announced departure to Cravath. The sources were allowed to speak without being identified in order to describe a dynamic that many of them are still grappling to process. Some described being asked in recent days whether Weil’s fall shocked them.”
• “Weil had been falling behind its competitors gradually but consistently over the almost two decades that Wolf and Aiello practiced together. Its revenue growth was half the annualized rate of its competitors from 2008 to 2025, according to data from The American Lawyer and Citi’s law firm banking group.”
• “But Aiello’s status as the firm’s largest business generator meant firm leaders were unwilling to part ways with him—even as he became a source of contention at board meetings over his unwillingness to invest in new practice areas. That meant the task of dealing with Aiello fell to Wolf—the man Aiello pledged his loyalty to for so long.”
• “The pair were bound in many ways, including a provision Wolf negotiated when he became the firm’s leader that he would always be paid the same as the firm’s highest paid partner. In recent years, that was Aiello. That dynamic complicated people’s view of their relationship and their respective jobs—Wolf’s only role was to run the firm; Aiello was tasked with client matters.”
• “As Wolf became preoccupied with managing Aiello, the law firm that was proud to be glued together by a family dynamic stumbled and tripped headfirst into a commercial-minded business model adopted by rivals who devoured it. It is nearly impossible to answer the inevitable question: Did Wolf fail at his job, or did Aiello neutralize effectively the only boss he ever had?”
• “‘I’d hate to admit that parts of that are true, but we were largely partners and people felt a certain allegiance to a certain degree,’ one former partner said. ‘And that came a little bit from Barry and Mike.'”
• “Partner loyalty to Weil carried a cost and the firm didn’t pay as well as some of its closest rivals. Its partners earned more than $5 million on average last year, lower than the $8 million to $10 million at competitors. Still, many partners were happy with the trade for quite some time, even as the industry grew to be defined by lateral jumping between firms.”
• “Aiello and Wolf were somewhat ill-suited for those recruiting wars, viewing the business through their lens of loyalty. Why would you hire a partner who was proving their disloyalty by leaving their firm? “
• “Instead, they focused on bringing back lawyers who had left Weil once before. They were proving how special Weil was by returning. Wolf called Aiello ‘the original boomerang.’ He had returned to Weil at Wolf’s urging amid Dewey’s merger talks with Orrick in 2008, a move that the American Lawyer reported contemporaneously was a key factor in those discussions’ failure.”
• “Aiello disliked lateral partner hiring so much that when a rival firm recruited a handful of its lawyers, a powerful partner at that firm was told Aiello was trying to get his phone number. The partner believed Aiello was going to dress him down, even if the call never came in the end. Standard business practice when losing a partner in Big Law is to shrug and say, ‘Best of luck in your future endeavors.'”
• “‘There is a humane side to both of them,’ said one former partner. ‘But the lesson to me is humans are not perfect. We’re all imperfect. We all have our faults. And we have to forgive each other.'”
• “The run on the bank at Weil was perverse in the sense that it was started by some of the firm’s highest paid partners and its harshest impacts will be felt by its most vulnerable employees. And that’s true. But the wealthiest members of the firm, by virtue of their own success that the firm relied upon, had the closest proximity to the Wolf-Aiello alliance, to where they may have understood it in ways that differed even from the two men themselves. Many of them seemed to sense it would be the firm’s demise. Some had predicted it for years.”
  “As of September, the two seemed to still have a misunderstanding whether Aiello had agreed to stay on past Wolf’s retirement. Sources familiar with the matter say the two spoke on Sept. 8. Wolf was asking Aiello to commit to staying as the firm recovered from recent departures. It is unclear the two men came to an understanding.”
  “What is known is that on Sept. 10, Aiello’s team walked into Wolf’s office and submitted their resignations, including on Aiello’s behalf. Their breakup wasn’t face-to-face. It was over text.”
• “Aiello chose Cravath, one reason being that it was willing to take his entire team, a display of the personal loyalty some saw as the best in him. Still, others viewed his decision as an ultimate betrayal.”
• “The timing couldn’t have been worse. Coupled with the major departures from the firm’s private equity practice, Weil’s PE service capabilities by the time Aiello quit were severely diminished. Neither of the top lawyers at two of the firm’s most important clients have responded to questions about whether they would have kept working with Weil, though there are rumors they would not.”

Joseph Tiano opines: “Law Firms Must Re-Engineer AI Use to Prevent Unauthorized Actions” —

• “As I read the news this weekend, I’m coming around to the view that the next-generation AI problem for law firms won’t be a hallucinated answer or an unverified court filing. It will be a capable tool that took an action nobody approved. Firms need to start thinking about this now.”
• “Two incidents from this week’s news show how general AI risks in other scenarios may translate over to the law firm context.”
• “Incident one. During testing, Claude was running example tasks on randomly selected webpages. It landed on PhillyUnsolvedMurders.com and filled out a form suggesting it had information about an unsolved murder. Police say the submission was marked as spam and never reached investigators. Apparently Anthropic reported the incident”
• “Incident two. In a report Friday, Anthropic disclosed that another model submitted forms to an undisclosed government website when it was supposed to stop before submitting. Anthropic calls this agent persistence.”
• “The failures differ, but they share a gap: no human approved the specific action. In the first, nothing limited where the agent could act. In the second, a stop-point existed and the agent went past it.”
• “AI didn’t create this gap. It exposed it. Today, if the duties of competence, diligence and supervision are followed, a lawyer is usually the last step before anything is filed or sent, so most firms never had to define anything beyond the final human approver control. Agents remove that step by default.”
• “Law firms have three options:”
  • “1. Resist. Ban agents, and watch shadow use appear anyway.”
  • “2. Patch. Issue a policy memo. (just like outside counsel guidelines, such a memo is a hopeful control at best.)”
  • “3. Re-engineer. Scope what each tool can reach, require human approval at the final step, and log every action.”
• Only the third option really holds up. Bans get routed around, and memos can’t be enforced particularly well.”
• “To re-engineer, I think it starts with an analysis of existing data pools: billing data, LPM data and DMs data where you can break each service into workflows by task and phase. Then map where an agent can act on its own and where it must stop for approval.”

Tiano also offers some compliance and risk management advice in another post: “California Regulates Lawyers Use of AI: Self Regulation, Delegation, and Liability Concerns” —

• “California just regulated how lawyers use AI. It’s well intended, but it raises a question I can’t stop asking as a legal ethics guy: what happened to lawyers regulating themselves? Was ABA Formal Opinion 512, our own guidance on generative AI, structurally inadequate?”
• “SB 574 takes effect January 1, 2027. Hundreds of decisions have sanctioned lawyers for hallucinated citations, so I understand the impulse. But SB 574 asks lawyers to meet standards the statute never defines, and the profession was not asked to define them. “
• “Lawyers may use AI ‘to assist in the practice of law’ but may not ‘delegate’ it. I kinda get the difference but the line is undefined, and so is the term it depends on. ‘Practice of law’ has never had a clean definition. Unauthorized practice of law (UPL) rules vary by state, courts often decide case by case, and the definition has long been murky at the edges: document preparation, legal information versus legal advice, and now software that drafts and analyzes. If ‘practice of law’ means everything lawyers do, no AI drafting is allowed. If it means legal judgment, the statute should say so.”
• “None of the four duties in the statute has a stated remedy, and the statute creates no cause of action. The only express remedy, sanctions under § 128.7, covers the citation rule alone, runs to opposing parties, and deters rather than compensates. So if a lawyer violates the statute, what can a client assert? Malpractice? Breach of fiduciary duty? Is a violation negligence per se, evidence of the standard of care, or nothing? And what are the damages? A fake citation may impact a court more than the client. A confidentiality breach raises harder questions: what is the loss, and was privilege waived? The statute is also silent on the witnesses and victims whose addresses and phone numbers it protects. And this is just a knee jerk reaction I had. “
• “What I’d do: measure and monitor: Log which tool touched which task, who verified what, and who made the legal judgment call, then monitor those records over time. When duties come without defined liability, enforcement defaults to State Bar discipline, malpractice carriers, and clients.”
  “Right away, I’d pull billing records from ten recent matters and ask whether you could show, from your own records, where a lawyer exercised judgment and where AI assisted. If you can’t, that gap is your compliance risk.”

And for those intrigued by these future-forward and emerging issues, see this fascinating thought exercise: “Law Department 2.0: When Clients Take Control (Part II)” —

• “What happens when clients really have command of their data?”
• “Law firms are governed by Outside Counsel Guidelines (OCGs). In addition to billing guidance, OCGs increasingly focus on how work gets done and when automation is expected. What if clients directed more of the systems that law firms use?”
• “What if firms were required to perform certain work within a client-controlled research environment, perhaps by leveraging a client instance of a legal research service? The client could gain additional insights into how the work was done, including search strategies and the AI prompts used to approach the matter. That information could help with risk assessment and decision-making. It would also become part of the client’s institutional knowledge so future matters have greater context.”
• “The same could hold true for workflows defined by the client using its preferred AI platform, or legal operating system, as some vendors call their platforms. Think Claude for Enterprise, Harvey, Eudia, or other solutions.”
• “In the future, panel participants might be required to use a ‘legal operating system’ to complete work. “
• “In AI, a harness is the surrounding infrastructure that constrains and directs a model’s operation. Perhaps OCGs evolve into something resembling Outside Counsel Harnesses (OCHs), defining not just billing rules but the technology and processes that firms must use to perform the work.”
• “Matter information already travels with a lateral between firms to put the client first. Wouldn’t it make more sense for the matter information to just stay with the client in the first place?”
• “This may be jolting for law firms, and to be fair, there would be much to think through. There will be situations where a firm has proprietary know-how and shouldn’t expect to give it up. Complicated situations, such as multiparty litigation, would pose challenges too. To be clear, I’m not suggesting that all work becomes controlled by the client, but the seesaw may tilt more in that direction. “
• “The very expertise that clients rely upon may atrophy if firms can’t benefit from the knowledge gained on a matter, too. That’s not good for anyone. It’s also in clients’ interest for firms to retain their ability to specialize. “
• “In the future, clients will require firms to conform even more closely to their preferences regarding how work is completed.”

And when AI meets Time Entry: “Finally, A Way To Measure AI ROI: Be Careful What You Ask For” —

• “In case anyone wasn’t listening, Legora, the legal AI provider, and Laurel, a work intelligence platform provider, recently announced a ‘partnership.’ A partnership that reportedly has two main parts. It will offer what sounds like a fairly standard timekeeping tool. But it holds out the promise of an intriguing future tool that raises some possibilities.”
• “What Legora and Laurel are promising is to give law firm management the ability to determine the ROI on their purchase of Legora. The ROI for most AI platforms has indeed proven elusive, except for administrative and nonbillable work where AI replaces human work. I can only assume those trying to determine Legora’s ROI have faced the same difficulty. Hence the effort.”
• “The whole premise is that the AI will do work, perhaps much of which had previously been done by paralegals or associates. That’s billable work, and for firms that use the billable hour model, that’s hardly a return on investment. To the contrary, it’s a loss. Try explaining at the next partners’ meeting that you’ve just spent a ton of money on something that reduces their year-end shares. And be ready for the question: is it too late to back out of this deal? Time saved is not necessarily money earned.”
• “The Legora/Laurel partnership presumably will measure the time saved by Legora AI. Which is easily convertible to dollars. The question then becomes: What does a law firm do with those dollars? Does it pass them on to the client? And what if clients want to see those numbers?”
• “As in, ‘We want to see the savings your tools came up with so we can determine whether our bills reflect that reduction.’ What happens when the tool for justifying the technology investment becomes negotiating leverage for the client? Once you start measuring AI’s value, the next question is who gets to keep it.”

David Kluft asks: “Can my client instruct me not to share information within my firm?” —

• “A WY civil litigant with counsel decided to file a pro se motion for sanctions against her own lawyers. The litigant claimed she shared information with an associate at the firm, and that the associate breached confidentiality by sharing the information with others at the firm.”
• “The court cited to Comment 5 to the WY Rule 1.6: ‘Lawyers in a firm may, in the course of the firm’s practice, disclose to each other information relating to a client of the firm, unless the client has instructed that particular information be confined to specified lawyers’ (ABA and many states have the same comment).”
• “Because there was no evidence the client had instructed the associate not to share the information (and for other reasons), the motion was denied.”
• Decision: here.

Yale Law Journal on: “Private Equity’s Law Firm Workaround: MSOs, Rule 5.4, and the Governance Gap” —

• “Private equity is moving aggressively into the legal sector, and the profession’s oversight infrastructure is wholly unprepared for this generational shift. To work around prohibitions against nonlawyer ownership, investors are repurposing the management-services organization (MSO): a split-entity model in which attorneys retain the regulated practice, but investors acquire the firm’s operating platform.”
• “This Essay provides the first systematic account of private-equity investment in law firms and the governance gap in which it is occurring—a vacuum unrecognized by the American Bar Association, state bars, or courts. The playbook is seasoned; the risks are not hypothetical. After pioneering the model with healthcare, private equity fundamentally reshaped accounting through hundreds of transactions in just a few years, with regulators scrambling only after the fact. Law is next.”
• “The MSO model rests on the fragile assumption that ‘business operations’ and ‘legal practice’ can be clearly and durably separated. Healthcare and accounting experience proves otherwise, with similar split structures consistently exhibiting formality erosion and investor ‘control creep’ through financial and operational pressure. Governance tensions run deep: the structurally conflicted MSO board must build value while policing its own influence over the interlinked law firm.”
• “The problem is not the MSO model per se, but the transactions proliferating in darkness without guardrails. This Essay proposes a three-part governance framework: (1) structural safeguards limiting MSOs to genuine support functions; (2) independent directors and a board ethics committee; and (3) ongoing compliance monitoring. The ultimate costs of the governance gap will fall on the public, not on investors. The window to act is closing fast.”

“Tennessee Supreme Court Rejects PE Law Firm Ownership” —

• “After considering potential updates to its rules on attorney licensing, the Supreme Court of Tennessee has announced that it will not be changing its regulations barring nonlawyers from ‘engag[ing] in the ‘practice of law’ or the ‘law business’ in Tennessee.’ “
• “The court received almost 400 comments in response to its request, according to the order. Those weighing in included lawyers, law firms, law schools and organizations including the Tennessee Board of Law Examiners, the Tennessee Access to Justice Commission, the Tennessee Bar Association, the Tennessee Attorney General, the Federal Trade Commission, the U.S. Attorney’s Office for the Middle District of Tennessee and the Council of the ABA Section of Legal Education and Admissions to the Bar, among others.”
• “‘From our perspective, the Tennessee order is a positive development,’ Attorneys’ Liability Assurance Society (ALAS) Senior Vice President of Loss Prevention Nesheba Kittling told Law.com in a phone call on Tuesday. ALAS was one of the organizations that submitted public comment to Tennessee’s high court.”
• “Kittling said that her organization is against private equity involvement in law firm ownership because ‘there are some lawyer liability risks associated with nonlawyer ownership of law firms,’ including ‘a downstream impact on lawyer independence, client service and adherence to the rules of professional conduct.'”
• “‘As lawyers, we have a unique relationship with our clients where client interests are supposed to supersede anything else, including profits,’ Kittling said. ‘The concern is that [by] introducing nonlawyer ownership, [including private equity], there may be an erosion of that, and there may be pressure to put profits over client interest and client service. For example, that could go to staffing, right? Is there pressure to decrease the amount of lawyers who are on a matter? And then does that decrease mean it impacts the client representation, which ultimately could lead to a malpractice claim?'”

Lawyer/Law Firm Impersonation Risk in the Age of TikTok: “TikTok Lawyers Face Their AI Clones” —

• “Documented found swarms of fake immigration attorney TikTok accounts and bots targeting immigrants in an analysis of tens of millions of posts.”

“Law firm Crowell faces disqualification bid in AI lawsuit” —

• “A fight over attorney loyalties has erupted in a lawsuit over the use of photographs to train AI technology, threatening law firm Crowell & Moring’s continued role in the case.”
• “Online art gallery DeviantArt asked a federal judge in Los Angeles on Wednesday to disqualify Crowell & Moring from representing automotive photography company Evox in the lawsuit, saying the firm previously advised defendant DeviantArt and its parent company on AI and other matters.”
• “DeviantArt said in a court filing, that Crowell advised its parent company Wix.com and its subsidiaries from 2022 through 2026 on AI litigation, AI regulation and copyright issues. The company said the firm also advised DeviantArt on its DreamUp AI image-generation service.”
• “‘Crowell’s conflict  is substantive, not merely technical,’ DeviantArt told the court. It said the firm’s prior work allowed it to acquire ‘material confidential information’ about the company.”
• Filing: here.

“Ex-Paul Weiss Client Can’t Pause Malpractice Suit Against Firm” —

• “Fairstead Capital Management’s malpractice suit against Paul Weiss for allegedly failing to disclose a conflict will continue rather than holding for an underlying appeal. Fairstead is represented simultaneously by Kasowitz and Skadden in different layers of the dispute.”
• “A former Paul, Weiss, Rifkind, Wharton & Garrison client who accused the law firm of failing to disclose a conflict in its representation cannot pause its malpractice lawsuit against its ex-counsel, a New York judge has ruled.”
• “Fairstead Capital Management’s motion to pause its case against Paul Weiss was denied by the Manhattan Supreme Court this month, despite its argument that a pending Delaware appeal for an underlying dispute could determine the scope of its New York legal malpractice case.”
• “The dispute between real estate investment firm Fairstead and Paul Weiss spans several court dockets in the two states. So far, more than half a dozen firms have entered the litigation across New York and Delaware, including Kasowitz LLP; Paul Weiss; Simpson Thacher & Bartlett; Skadden, Arps, Meagher, Slate & Flom; Quinn, Emanuel, Urquhart & Sullivan; Morris, Nichols, Arsht & Tunnel; and Ross Aronstam & Moritz.”
• “Fairstead originally retained Paul Weiss to advise it on removing two executives, William Blodgett and John Tatum, who allegedly sought to either take over Fairstead or alternatively create a new competitor.”
• “According to Fairstead’s legal malpractice complaint, Paul Weiss allegedly failed to disclose its ties to the influential Tisch/Sussman family, which both Blodgett and Tatum are linked to, and also allegedly gave the company poor advice, which led to a ruling against Fairstead in a Delaware suit over Tatum’s removal.”
• “That Delaware ruling is the one currently on appeal. As a result of the pending appeal, Fairstead sought to delay its New York case against Paul Weiss. Manhattan Supreme Court Justice Joel M. Cohen denied that stay on Friday and kept the parties to their already-agreed-upon briefing schedule for Paul Weiss’ pending motion to dismiss.”
• “Under that schedule, Fairstead must file any opposition to Paul Weiss’ dismissal motion by Friday, October 23. Paul Weiss then has until November 13 to reply.”

“Judge Finds No Conflict of Interest for Defense Attorney in 2016 Homicide Case” —

• “DC Superior Court Judge Todd Edelman allowed a defense attorney to remain on a murder case ahead of trial on Oct. 20.”
• “Wilbert Whitaker, 77, is charged with first-degree murder while armed and possession of a firearm during a crime of violence for his alleged involvement in the fatal shooting of Leo Hackett, 30, on April 30, 2016 at the 800 block of 21st Street, NE. Hackett died from a gunshot wound to his chest.”
• “Whitaker’s attorney, Nathaniel Mensah, began the hearing by explaining a potential conflict of interest that would necessitate his removal from the case if real. The conflict stemmed from Mensah previously working for a firm that represented the defense’s key witness, Whitaker’s wife. Mensah explained that while he currently does not currently know any information that could bias his relationship to the witness, he could not guarantee he won’t remember this information during the trial.”
• “After looking at caselaw, in specific Freeman v. United States, Judge Edelman ruled that there was no current conflict of interest, and Mensah should stay on as Whitaker’s lawyer. “
• “Judge Edelman said that if Mensah in the future did remember some information about the witness that would create a conflict of interest, he can withdraw from the case then.”